Did your 2022 not turn out as well as you had hoped? Perhaps you broke even, or even made a loss? Have some of your client contracts not been renewed for 2023? Are you starting to seriously worry about what the financial future of your agency might look like this year? Perhaps redundancies seem the only option.
You are not alone.
Redundancies: The Only Option?
Our resident HR expert, Sarah May, hears from many agencies who are going through similar and their thoughts reluctantly turn to having to let people go.
But why? Recruiting good people has been so hard. Why spend all that time and effort finding good people, only to have to let them go?
There are some alternatives to redundancies or different ways of going about it that will cause considerably less damage. Here are a few pointers:
What do I need to know about redundancies?
A redundancy situation occurs when:
- The business shuts down completely
- A particular part of the business closes
- A specific location shuts down (even if you are moving to a new location)
- You need fewer employees in a particular role
How do I go about making redundancies?
You must have a genuine redundancy situation. It should not be used to deal with other issues such as underperformance or getting rid of someone you don’t like.
You must also follow a fair process, which involves meaningful consultation and fair selection. Where possible, you should offer alternative employment and explore any other potential options to avoid redundancy.
Anyone you are making redundant is entitled to a meaningful consultation process, the right to be accompanied, the right to appeal and if over two years’ service and the right to a redundancy payment, as well as their contractual notice.
In most cases, these consultations can be individual, although if you put more than 20 people at risk, you are obliged to collectively consult.
If an employee has under two years of service, there is no legal obligation to consult and you don’t have to go through a formal process. That said, it is always best to hold a meeting to explain the situation, give them the opportunity to respond and always make sure you pay contractual notice.
What are my options?
When you consider redundancies, you should try and find alternatives, where possible. Here are a few suggestions to think about early on:
- Have you looked at your other expenses? For example, do you spend a fortune on premises, employee lunches or a big Christmas party each year? Employees would rather you scale back on those types of business expenses first.
- Freeze recruitment if you haven’t already done so. You might be recruiting for a different role, but if you can get by without, do so. When people leave, don’t be so quick to replace them just yet, get by with freelancers or see the lay of the land before rushing in to hire new people too soon.
- It should go without saying, but if you are looking at making employees redundant, stop using freelancers, unless they are fulfilling a business-critical role that no one else can do.
Working with your team to find solutions
- If the situation is only temporary, could you ask your team to take some annual leave? You are able to make employees take holidays at a time that suits you. As long as you give notice that is double the length of the leave. If you want them to take one week of annual leave, they need to be given two weeks’ notice. Not ideal, if people are saving their holiday days for an actual holiday, but preferable to having no work at all.
- Have informal conversations with employees and see if there is any scope for reducing hours. Lots of people dream of working 4 days a week, or a shorter working day. Could you do that with some of your team either temporarily or permanently? They would have a better work/home-life balance, and you would save yourself some pennies too.
- You might have a short time/layoff clause in your employment contract. This gives you the contractual right to temporarily reduce hours or provide no hours. There are some rules around time limits for this. However, it could work on a very short-term basis. Indeed, many employers relied on this contractual clause in the early days of the pandemic, before furlough existed. The downside is that once you do this, the employee’s faith and trust in you is diminished, and it will lead to poor morale and upset. But again, a better alternative to losing your job completely.
Look at length of service
- If you have done all of the above and know you need to let some people go, one of the easiest things to do might be to look at those still on probation, or under two years’ service, and sadly give them their notice. This may seem a simple option. However, it won’t necessarily leave you with the best people to propel your agency forward to the next chapter. You may, therefore, prefer to pool all your employees together including those over two years and carry out a full redundancy consultation with all of them.
What if I’ve done or considered all of the above and I still think I need to make some people redundant?
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Sarah Hoyle, Head of People and Wellbeing, The Agency Collective
Sarah is the resident HR expert at The Agency Collective. If you are a member, you get Sarah included in your membership and she is on hand to help agency founders with their everyday HR challenges.
When not talking about all things employment law and HR, shes enjoy inspiring others to help young people into the world of work (that means lots of work with schools), mentoring and changing a little corner of the world.